Sylvia Pennington

After two decades of debate over whether governments should be selling IT services to themselves, the Queensland government has entered the "divestment scoping phase" for CITEC.

Following "market sounding" in late 2013, the Department of Science, Information Technology, Innovation and the Arts announced it was getting out of the game and putting its bureau on the market. It says it turns over $170 million and makes a profit.

The move comes as Canberra considers the reverse strategy – creating a super department to aggregate back-office functions and IT procurement for federal government agencies.

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The department has not ruled out bundling the business for sale as part of a larger outsourcing deal, but will consider its options once the scoping phase is complete, it told Fairfax Media.

The decision to sell is in keeping with the strategy of debt reduction via assets sales the Liberal National Party administration is pushing with its Strong Choices campaign, but whether the sale will put much cash in the bank is open to question.

One highly placed source said CITEC was nobody’s bargain, describing it as "a bloated administrative organisation with a limited range of services that can easily be sourced elsewhere at much lower costs".

While it should have developed expertise in challenging areas of information and communications technology delivery, such as providing support to rural clients, the division instead locked agencies into expensive, central business district-based services, the source claimed.

"CITEC became fat and lazy and, worst of all, focused on the services that were the easiest to provide," he said.

"CITEC used their huge mark-ups to cover their massive overheads – agencies paid for them …CITEC left the difficult, statewide 24/7 services to the agency chief information officers. Where is the benefit of CITEC in that, and how valuable would that be to sell? It simply isn’t."

Established in 1965, the division employs about 400 staff and offers services including storage, networking and software development to agencies.

Its activities include CITEC Confirm, a transaction processing unit for services including debt recovery, Court e-filing, and insurance-claim processing.

Historically, CITEC has been subject to indecision by governments of both stripes about what its remit, as a quasi-commercial entity, should be. Its practice of bidding for private-sector work was a long-standing bone of contention with commercial competitors before it was abandoned in 2007.

Gartner analyst Rick Howard believes Queensland’s decision to divest should serve as a warning "to all government shared-service organisations that are not operating a customer-oriented, value-based service portfolio".

While a sale would allow the government to shed 400 ICT staff, the source questioned their attractiveness to buyers.

"We are talking about people who, in the main, don’t have the right skill sets for 2014 ICT," he said. "In a cloud world, many ICT operations skills are no longer required."

For their part, local vendors say the government can’t shift the division quickly enough.

John Grant, managing director of IT services company Data#3, said CITEC had been "half pregnant for a number of years, and the sooner its future can be settled, the better for everyone, not the least of whom are the CITEC employees".

The chair of the Queensland branch of the Australian Information Industry Association, Simon Kaplan, says the industry has lobbied for a For Sale sign for two decades.

"We’ve been of this view stretching back to at least the Goss government," he said. "It’s been tried many times before but has always seemed to fail, so it’s great to see the Newman government’s determination to go through with this.

"Once the CITEC sale is complete, the government will make decisions on an even broader range of IT questions on a contestability basis, which should give more work to the industry."

While insiders say the long-running uncertainty about the division’s future has taken its toll on staff morale, the CITEC workforce "remains engaged and committed to delivering services to its customers", the Department of Information Technology said.

What is CITEC worth and does anybody want it in its present form, or will it be a business the Queensland government struggles to offload at any price? Tell us what you think in the comments.

4 comments

An interesting piece of journalistic prowess indeed. The highly placed source is more than likely aware, that given the current probity regime, providing information to the media without CITECs prior consent is a sackable offence. That is if the highly placed source is indeed a CITEC or DSITIA employee. As for comments that many ICT operations skills are no longer required, I would like this highly placed source to explain how a cloud based service is actually run. Surely not with water vapour and condensation.

Commenter

Pascal Van Mello

Location

Brisbane

Date and time

April 29, 2014, 8:52AM

It will depend on what they are offering as part of the sale. Any employees that were employed by the new company would most likely have been paid out any leave owing (including long service leave). No one would want to take over this overhead.If I was in a position to buy this organisation, I might take over maybe 50% of the staff (would all depend on what the government contracted us to do as part of the sale). There is most likely a lot of fat within the organisation (especially in the management area) and any duplicated services would not be required as well. Within 12 months, there would be more redundancies as well, as the business streamlines its operations.Companies may only want only some of the current structure .... leading to a break up of the organisation - data and infrastructure to one company, web services to another (I have seen this happen, however it can lead to multiple companies working on the same project, which could be costly to the government).However, there has always been differing opinions for state and federal operations. Both are trying to achieve the same result - a more efficient system of the provision of IT services to there constituents. The sale will give the employees some certainty - even if it's just for the near future).

Commenter

Sleeping Tiger

Location

Sydney

Date and time

April 29, 2014, 11:40AM

@Sleeping TigerThe QLD government holds the entitlements and is supposed to pass them onto the acquirer hence no additional overhead.

Commenter

Pascal Van Mello

Location

Brisbane

Date and time

April 29, 2014, 5:39PM

The QLD government holds all entitlements and they shuold be transferred to the acquirer so there is no overhead expected.

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